Will Citigroup Follow JPMorgan and Wells Fargo Lower?

Citigroup reports earnings on Wednesday morning, following the Tuesday results from JPMorgan and Wells Fargo. Here's what the charts look like for Citi stock.
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The banks did not get off to a good start on Tuesday, with JPMorgan  (JPM) - Get Report and Wells Fargo  (WFC) - Get Report taking post-earnings tumbles.

With Citigroup  (C) - Get Report, Bank of America  (BAC) - Get Report and Goldman Sachs  (GS) - Get Report on deck, investors are surely starting to worry about the group. 

While Wells Fargo continues to struggle with its own issues, it’s concerning to see such a nasty post-earnings reversal in JPMorgan, a stock many consider best in class.

If JPMorgan can’t hold its post-earnings gains, how will investors react to the rest of the group’s quarterly figures?

For Citigroup the road's been bumpy. This bank went from Wall Street favorite in January to a dud by March. The stock hit 52-week highs when it reported earnings in January, topping $82. Two months later, shares hit a low of $32, down more than 61% from that high.

So what do the charts say now?

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Trading Citigroup Stock

Weekly chart of Citigroup stock. 

Weekly chart of Citigroup stock. 

One giant warning sign appeared on the weekly chart, in the very first week of the coronavirus pullback. That warning sign was the way Citigroup stock knifed right through its major breakout point at $70. The stock didn’t even hesitate at this level, closing the week near $63.50.

While it was encouraging to see the stock initially hold its 200-week moving average, the fact that $70 - a multiyear resistance point that triggered a massive rally - couldn’t even give Citi a bounce was just too concerning.

Even though the stock has bounced solidly off its low at $32, which lines up quite nicely with the 2016 low, it hasn’t even retraced 38.2% of the current decline. Keep in mind: The S&P 500 has retraced more than half its pullback thus far. So the fact that Citigroup stock is struggling to hold the 23.6% retracement is somewhat pitiful.

It will need to hold above this $44 area after reporting earnings in order to stay above that retracement. Should it fail to do so, $40 is in play, followed by $37.50. Below that and $35 or lower is on the table.

Should the post-earnings reaction be favorable, look to see if Citi can reclaim the $47.50 level, followed by the 38.2% retracement near $51.31. Above that puts the declining 10-week moving average in play.

So far, the stock hasn’t been a pillar of strength - and that’s putting it mildly. In fact, of the five bank stocks listed above, Citigroup has been the worst performer this year. 

With the negative reaction to Tuesday’s bank earnings, optimism for Wednesday’s results is quickly fading. Perhaps that will be enough to soften the blow.

As usual, follow the levels. Below $44 puts $40 in play. On the upside, see how C stock handles $47.50.